Renewable projects face funding obstacle

A total of 64 renewable power plant projects to be developed by independent power producers (IPPs) are facing difficulties in getting the required funds from lenders although they have signed power purchase agreements (PPAs) with state-owned electricity firm PT PLN, Bisnis Indonesia reported on Thursday quoting data from the Indonesian Chamber of Commerce and Industry (Kadin), a business lobby group.

The paper quoted Head of the Association of Hydro Power Plant Developers, Riza Husni as saying that that the renewable projects are facing difficulties in getting loans from banks due to the low tariff of the electricity to be sold to PLN.

According to Minister of Energy and Mineral Resources Regulation No 50/2017, tariff of electricity from renewable power plants is limited at 85 percent of so-called local electricity supply cost of PLN (or BPP) where the project is located if it is higher than the national average BPP. If the local BPP is equal to or lower than the national average, then the IPPs can negotiate the tariff with PLN.

Husni said that the dozens of PPAs on hydro power projects signed by PLN and IPPs during the past couple of months were mere public relation campaign while in fact many of the IPPs were actually facing funding obstacle due to the unattractive tariff.

The government is pushing for the development of renewables including hydro power projects in a bid to help meet its target of renewables to account for 23 percent of the country?s energy mix by 2025, and also to help provide affordable electricity for households in remote regions by taking advantage of local renewable resources such as hydro, solar, and wind. (*)